Speedy Runner makes running shoes and they have gathered the following data for the month of October: Data Cash on 10/1 $15,300 Expected Cash Collections $435,000 Direct Materials Cash Disbursements $80,000 Direct Labor Cash Disbursements $32,000 MOH Cash Disbursements $25,000 Operating Expenses Cash Disbursements $110,000 Capital Expenditures Cash Disbursements $200,000 Speedy Runner requires an ending cash balance of at least $12,000 and can borrow from a line of credit in $1,000 increments. How much will Speedy Runner need to borrow at the end of October?

$15,300

Explanation:

The computation of the amount borrowed is shown below:

Beginning Cash Balance$15,300

Add: Expected cash collections$435,000

Total cash available$450,300 (a)

Less: Disbursements  

Direct Material cash disbursements$80,000

Direct Labor cash disbursements$32,000

MOH cash disbursements$25,000

Operating expense cash disbursements$110,000

Capital Expenditure cash disbursements$200,000

Less: Total cash disbursement-$447,000 (b)

Amount left  - $3,300   (a - b)

Borrowed amount is $15,300

Ending cash balance is $12,000

We simply add the collections and deduct the Disbursements to the opening cash balance

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